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Lars Hjartbo: “Airline passengers are not ready to accept higher prices or fewer savings in travel retail. On the contrary, they think travel retail is too expensive as it is.” |
SCANDINAVIA. MyTravel Airways announced today that it has decided to terminate its cooperation with Parfums Christian Dior following the French beauty house’s proposal to reduce the retail price saving (over domestic) from the current 25% to 20%.
Duty Free Manager Lars Hjartbo said: “Christian Dior has been a valuable partner to us for many years. Their products perform well and the service has been excellent, but we cannot let anyone but ourselves decide about our pricing strategy. Also, we have learnt from recent internal and external surveys that airline passengers are not ready to accept higher prices or fewer savings in travel retail. On the contrary, they think travel retail is too expensive as it is.”
He continued: “If we accept the 20% proposal from one supplier, we would have to accept it from others as well, which is a big step in the wrong direction for us and for the travel retail industry. Most airports are complaining about lower penetration caused by fewer savings. I do not want that to happen to MyTravel Airways”.
He continues: “There are several reasons why airlines need to have better offers than airport shops and ferry operators. Firstly, airlines do not offer the customer the opportunity to see and feel the product; they do not carry testers and do not offer service from beauty advisors, dedicated sales personnel etc.
“Secondly, by nature, airlines have to be competitive: “˜perception is reality’ – and if the customer thinks the same product can be bought at the destination for a lower price he will not shop with the airline. This is why the Scandinavian airlines have always been very careful with their pricing, guaranteeing minimum savings of 25% on perfumes and cosmetics.”
He said that the Scandinavian charter business has historically been a world leader in spend per passenger owing to the tax factor, resulting in a firm base of loyal customers.
“Value for money has been the key driver from the start, ensuring that the customers will benefit from certain savings,” he continued.
The MyTravel Airshop pre-order programme enables the passengers to shop from a 116-pages catalogue with 750 listings. Spend per passenger exceeds DK500 (US$85) per passenger, which he said is believed to be a world record among airlines.
We’ll bring you reaction from Parfums Christian Dior as soon as possible.
BACKGROUND
MyTravel has invested heavily in testing price elasticity among its Nordic customer base, writes Dermot Davitt.
In 2005, the carrier introduced a series of radical price-cuts in key categories, in response to a 2004 AIM Nielsen survey that found Nordic travellers confused and disillusioned about travel retail prices.
The key measures were:
– Prices on snuff were reduced by -50%, delivering a +600% rise in sales but a marginal drop in profit;
– Cigarette prices fell by -35%, resulting in a +192% surge in volume, and again, a slight fall in profit;
– Confectionery prices were reduced by -17%, resulting in a +142% rise in sales, and similar profits to previously;
– Women’s fragrances were reduced by -10% in price, with a consequent +20% volume rise, and a 5% rise in profits
The overall effect was a +157% increase in volumes, and a +4% profit rise.
The 2004 Nielsen survey was followed up by another this year, undertaken by research group Kjaer and Schmeltzer. It details attitudes and perceptions among consumers in the Nordic region, with a strong emphasis on their reaction to price. The results were revealed at this year’s Nordic Travel Retail Seminar, organised by the Nordic Travel Retail Group (NTRG) and hosted by MyTravel.
Consumers’ perception of price was “blurry and diffuse”, found the report, although price remained a central motivation for most customers, while many travellers said they found the offer predictable. In a region with traditionally high levels of penetration and spend, the lack of enthusiasm for travel shopping was of great concern for many delegates at the Nordic event.
The full 2006 report is available at a price of €500 to non-members or €250 to members of the NTRG. Send your order to Rostra Kommunikation, Nikolaj Plads 23, 1067 Copenhagen, Denmark; or tel: +45 7023 0053 for more details.
HAVE YOUR SAY: Do you think Lars Hjartbo is doing the right thing? Or was Dior right to try to limit the price saving in light of its domestic market business? You can express your point of view – named or anonymous – by visiting The Moodie Report Forum on our home page. To do so, simply click here.
MORE STORIES ON NORDIC TRAVEL RETAIL
Traveller disillusion should be a ‘red flag’ for the trade, says Nordic Group – 09/05/06
Nordic Travel Retail Seminar concludes with a call for industry think-tank – 04/05/06
